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April 12, 2011

Thai rice exporters eye investments in Cambodia

BANGKOK, April 12 (Reuters) - Thai exporters plan to invest
in Cambodia's fledgling rice sector, lured by low production
costs and tariff-free exports to the European Union, an industry
official said on Tuesday.

Cambodia, the world's 15th-largest rice producer caught the
attention of Thai exporters because of its growth potential
and access to special EU privileges for poor countries, Korbsook
Iamsuree, president of the Thai Rice Exporters Association, told
Reuters.

"Cambodia is an interesting country to invest in. The rice
quality is OK and there is plenty of land to grow more rice at
cheaper costs," she said.

Thailand, the world's biggest rice exporter, is facing
higher production costs and uncompetitive export prices. The
country has shipped less rice because Vietnam, the
second-largest exporter, is boosting its market share with
cheaper rice.

Korbsook said Thailand needed to find ways to cut production
costs by looking for cheaper rice from neighbouring countries.

Thai exporters met last week with Cambodia's Commerce
Minister Cham Prasidh, who is keen to attract foreign investment
in the country's rice industry and boost exports this year.

Korbsook said Thai exporters would be interested in milling
rice and exporting them via a Cambodian port in a bid to get tax
privileges from the EU rather than investing in rice planting.
But the actual value of investments would depend on the
development of Cambodia's logistical infrastructure.

Thai exporters had also sought to invest in Myanmar, but
abandoned the idea due to the political uncertainty and
unconducive investment climate in the neighbouring country.

Cambodia is targeting annual rice exports of 1 million
tonnes of milled rice this year, dramatically up from the
current volume of about 20,000 tonnes.

However, the goal was still small compared to Thailand,
which ships around 10 million tonnes and Vietnam, which exports
about 6 million tonnes.

INVESTMENTS SOUGHT

To achieve the 1 million-tonne mark, Cambodia needed foreign
investment in milling technology and government support by
providing soft loan.

After years of political turbulence, including civil war and
the deadly Khmer Rouge era, Cambodia's economy was in tatters by
the end of the 1980s, when it produced around 7 million tonnes
of rice, most of which was milled and re-exported by Vietnam.

Korbsook said producing and exporting rice from Cambodia
would help expand sales in the Euro zone, with firms
capitalising on the EU's zero-tariff "Everything but Arms"
privileges, which it offers to less developed nations.

Cambodia is looking for foreign investors to boost its
milling sector and it has allocated a budget of $23 million to
the Ministry of Agriculture this year, up from $3 million in
2010.

However, Korbsook said investment in Cambodia by Thai
exporters is not expected to be substantial over the next couple
of years, as there were still some obstacles that could push up
costs.

"The logistics system is still not ready for exports and
that would result in higher costs," she said.

"We expect the Cambodian government to overcome this problem
very soon and by that time, investing in Cambodia would be more
interesting."